On Wednesday, the European Central bank announced it will stop producing and issuing 500-euro notes around the end of 2018. Once the bank stops issuing the notes, those remaining in circulation will remain legal tender – at least for the time being.

In a press release, the EBC said it made the decision to eliminate the 500-euro note due to “concerns that this banknote could facilitate illicit activities.”

Virtually all of the mainstream reporting went with this “we’re doing it to fight crime” spin. Take this opening paragraph from the New York Times:

A suitcase stuffed full of cash may soon be worth a lot less. In a move aimed at hampering cash transactions by terrorists, drug dealers and money launderers, the European Central Bank on Wednesday announced an end to the 500-euro bank note, worth roughly $575.”

One leading German economist also accused the European Central Bank of ulterior motives. With fewer large bills, it will be easier for the central bank to push interest rates to new lows, said Clemens Fuest, president of the Ifo economic research institute in Munich, which has been critical of the central bank’s cheap money policies. That is because for almost two years the European Central Bank has been charging lenders a so-called negative interest rate to keep money in its virtual vaults, which are considered the ultimate safe haven…In theory, banks can avoid this de facto rent on their deposits by holding cash in their own vaults. But in practice it is expensive to store large amounts of bills safely — and it would become even more so if the denominations were smaller.”

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One thought on “The War on Cash: Bye-Bye 500-Euro Note”

I don’t like being punished for the sins of others. That’s why I’m a Libertarian: I have confidence that we, as individuals, can do better than the-powers-that-be. Taken at face value, they’re saying they want to punish good people along with the bad because somebody might use cash illegally–it would make more sense to make drug sales legal and sue those who do harm with them–less illegality and less crime. By their logic, all denominations in all currencies should be abandoned. But, I tend to agree that this is not about crimes committed by bank depositors. A one-dollar bill is only worth a penny or two (less, really), already, and the collapse was set up in 1913. End the Fed.

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